Commodities sold off yesterday on news China's economy is slowing. Oil, Copper, Metals, and Grains all dropped in price.
The USD rallied on this news, pushing down the AUD and JPY considerably. But the surprise strength of the day was in the EUR - it weakened against the USD, but less than the AUD, JPY, or GBP.
I am having a hard time separating the flight to quality impact of the news out of China (China slowing means the world economy is slowing) and the positive impact of lower Crude prices (lower crude prices are excellent for the U.S. and Europe).
In any case, the sell off boosted the USD.
The USDJPY is once again near it's highs, which means the Yen is near its' lows against the USD. The flag formation predicts a price target of nearly 87.30!
But the resistance in the last few days has been significant, and there is a huge formation in the 85.50 area which could be difficult to break. It's likely the 85.50 area will cause problems for the yen, even if the long term target of 87.30 is met.
I pointed out last week China and Japan made a deal on Chinese debt - and this deal implies a secondary deal on the value of the USDJPY. But the price level of the deal is not known. The trading will be choppy as the market searches for this acceptable equilibrium point.